Question on the detailed proposals on the establishment of a Policyholders’ Protection Fund in the Estimates of Expenditure 2011-12 by Hon KP Chan:
According to the Controlling Officer’s Report in Head 148 – Government Secretariat: Financial Services and the Treasury Bureau (Financial Services Branch) in Volume IA, the Government will prepare detailed proposals on the establishment of a Policyholders’ Protection Fund to better protect policyholder’s interests in the event of an insurer’s insolvency. In this connection, please advise this Committee of:
(a) when the Government will begin to prepare the proposals, what subjects the proposals will cover, what the expenditure involved is, how long the legislative process is expected to take, and when the whole legislative process can be completed;
(b) whether the Government will set aside funds for making advances to the Fund initially so that the Fund can come into operation as soon as possible.
Asked by : Hon. CHAN Kin-por
Reply :
(a) The Government will soon consult the public on the proposals to establish a Policyholders’ Protection Fund (PPF). Depending on the views to be collected from the public consultation, we aim to finalize the proposals by end of this year. Assuming smooth progress of the preparatory work, we expect that the proposed PPF can be implemented in 2013-14 at the earliest.
In order to take forward the proposed establishment of a PPF, and also prepare the consultation conclusions and develop detailed proposals on the proposed establishment of an independent Insurance Authority to facilitate public discussion and further engagement with the industry and stakeholders, we have obtained the support of the Establishment Subcommittee of the Finance Committee (FC) of the Legislative Council on 16 February 2011 to create a supernumerary Administrative Officer Staff Grade C post. The staffing proposal will be put to the FC in April 2011 for approval. The proposed creation of the supernumerary post will incur a full annual average staff cost of $2,097,000. The post holder will be supported by three non-directorate posts (including one Senior Administrative Officer, one Personal Secretary I and one Assistant Clerical Officer) and their full annual average staff cost is $2,272,000. We have included the necessary provision in the Estimates of 2011-12.
(b) The Government’s proposals to establish a PPF will include a mechanism to bridge any funding gap in the interim caused by an insurer insolvency before the PPF has reached an adequate size. We will consider possible options such as allowing the PPF to borrow from the Government or from a third party with the Government acting as the guarantor. We will take into account the views to be received from the public consultation when finalizing the proposals.